Before this project started in 2017, a placeholder budget of $128.8 million was set aside in our 10 Year Plan 2018-28 for a new wastewater solution. Since investigating options and doing technical work, we now know that the cost will be far higher.
This project is likely to be the single biggest programme to be contemplated by Council for our 10 Year Plan 2021-31. It will have very significant impacts on Council’s debt levels and the rates income required not only to service and repay the debt, but also to operate the treatment process and discharge.
The Council will as part of its decision-making process be faced with prioritising its investments in other facilities and services. This is so that its debt levels do not exceed the limits that will be imposed by its lenders and rates increases are not higher than ratepayers can afford.
Unfortunately, this isn’t an optional project. We need to get a new resource consent, so these costs will need to be factored into long-term planning for our city.
The challenge will be to determine the most cost-effective option that strikes an appropriate balance between environmental, cultural, social and financial considerations. Government, external and industry funding is being explored, and these conversations will continue as we get closer towards choosing the best option for our city.
For each option we have outlined the lifecycle cost, which is the cost of purchasing infrastructure or land, upgrading facilities, maintenance and the operational costs for the potential 30-year life of the project.
We’ve also given a very indicative view of increases in rates levels that might be necessary to fund the various options.
The rates impact assumes a very significant contribution by our trade waste customers. Around 500 businesses currently pay around $1 million combined per year.
These costs are just estimates, and are likely to change as we investigate options more.
We have had to make assumptions to get to these rate impacts. These include:
- The Council will need to borrow the full capital cost of the project then fund the debt servicing and repayment over the life of the expected consent (ie 30 years)
- The additional charge will be borne by trade waste users and ratepayers with access to the wastewater network
- The average interest rate for loans raised and refinanced throughout the 30 years is assumed to be 3.5%
- There will be reductions in the present costs for treatment and disposal once the plant is commissioned. It is assumed this will amount to $2.4m a year and there will be an additional saving of $1.2m a year, being the amount that is being spent each year to investigate and determine the best practicable option for the way forward
- There will be operating and maintenance costs that vary for each of the options being considered
- There is no allowance made in the projected rates to fund additional costs that might be necessary to maintain the wastewater pipe and pumping station network through the city over the 30-year period
With options involving land, there is a potential chance of growing something on the land, like trees or hay, that could create revenue for Council. However, we won’t know if this is possible until we have identified locations for land.
Nature Calls and the 10 Year Plan
Every three years, councils are tasked with creating a plan for their city for the next 10 years. These plans explain how we’re going to continue to provide and maintain everything you love and are used to here in Palmy.
A large part of our 10 Year Plan focuses on our infrastructure assets – like water. We’ve known that we’re going to need to plan for our future wastewater discharge for some time, and it has featured in the past three 10 Year Plans.
As part of the 10 Year Plan process, we are required to indicate an amount we think Nature Calls could cost. As we are in consultation currently, we have not identified a preferred option, so we don’t have a set dollar figure yet.
So, we’ve assumed an acceptable option could be delivered for $350 million (plus inflation) but it could be more or less than this based on your feedback, and a range of other factors.
We want you to have your say on Nature Calls and the 10 Year Plan
This year, Nature Calls is a critical element of our 10 Year Plan because, over the next three years, we’ll be selecting and applying for the consent for our future discharge. This is the biggest financial project we’re preparing for in our 10 Year Plan.
The consultation for the 10 Year Plan is occurring over a similar time period to the Nature Calls consultation – but they are being undertaken separately as they are governed by different legislation.
The 10 Year Plan consultation falls under the Local Government Act. It will be asking you about a range of things, including Nature Calls. However, when it comes to Nature Calls, the key impact of the project on what else Council can afford to do, is the key question.
In comparison, the Nature Calls consultation falls under the Resource Management Act and will be asking you a range of questions about your social, environmental, cultural, technical and financial values to guide Council in selecting the preferred options.
We’d love you to make a submission on both consultations, however the feedback from both consultations will be shared with Council as part of its decision making on both processes.
What do the costs include?
Identifying the costs for each of the options has been a refinement process that began when the Council developed the long list of options in 2018. At this early stage, each of the shortlist options included a high level estimate of capital, annual operation and maintenance and Net Present Value. For the feedback period in 2020, the cost estimates were refined. Although still conceptual at this point, the cost estimates were updated to include more up to date capital, operational and maintenance costs as well as potential income. The type of income estimated for land based discharges is from commercial crop activities or forestry. Land values were also estimated for coastal and inland on an average hectare basis.
There are a number of considerations we take into account in refining the cost estimates for each of the shortlisted options, these include:
- Operating & Maintenance (O&M) Costs presented are based on the O&M costs in the first year of funding and do not include net income from land use activities as these are not yet established.
- O&M varies depending on growth, and includes renewal works for infrastructure in the year estimated to be required.
- Net Annual Income is assumed to happen annually from Year 1 (Y1) for inland cut and carry sites, and for the forestry sites it has been assumed they will be harvested and replanted through Y26-30.
Why have costs dropped since the 2020 feedback period?
Since July 2020, our technical team of experts has refined each of the options, including identifying a desirable treatment regime that will achieve One Plan targets and minimise effects on the environment. Further work has also been undertaken to modeled the effects of growth on the network and associated operation and maintenance costs for each option. We have also further explored the opportunities for revenue with each of the land based options and updated these costs. While the Council is continuing to engage with Government over potential funding opportunities for the BPO and other infrastructure investments, we have not accounted for external funding at this stage of the project, as this is not yet known. The Council is directly engaged with Government through the Three Waters program and is continuing to explore funding opportunities for the BPO option.
This table shows how much your rates could increase under the three options
Current wastewater charge per rateable unit* per year
New wastewater charge
Increase in change
|Discharge option 1: Majority of treated wastewater is discharged to the Manawatū River via a wetland flow, with significantly improved removal of contaminants including phosphorus and nitrogen||$299||$739||+$440|
|Discharge option 2: Hybrid discharge between land (55%) and the Manawatū River (45%)||$299||$634||+$335|
|Discharge option 3: All treated wastewater is discharged to the ocean||$299||$731||+$432|
*A rateable unit is a residential home or unit or per pan (toilet) for non residential ratepayers.